Hello, International Magnates and Firms! Please Come and Sue the UK for Vast Sums.

Can you reckon our political system functions? It could be similar to this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills pass into law. Legislation is upheld by the courts. Simple as that. However, that was how it once functioned. Not anymore.

The Rise of Secret Tribunals

Today, overseas companies, and the billionaires that control them, have the power to sue governments for the laws they pass, at secret arbitration panels staffed by business advocates. These proceedings take place away from public scrutiny. Differing from national judiciaries, these panels grant no opportunity to appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even businesses based in this country. They are open exclusively to businesses registered abroad.

When a secret court determines that a government measure might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, even billions.

These sums represent not actual losses but money the arbitrators decide the company would perhaps have made. The state might be compelled to drop the legislation. It becomes deterred from passing future laws along the same lines, worried about being sued.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being filed, as companies learn from each other, and private equity finance suits for a share of a portion of the takings. The consequence? Democratic sovereignty and popular rule are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the decisions enacted by parliaments is that this clause has been inserted – without public consent, and frequently under a climate of total confidentiality – into international trade agreements.

A Concrete Example: The UK Coalmine

A year ago, a conservation group secured a significant win at the High Court. The presiding officer found that plans to open the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have no consequence on our carbon budgets. The incoming administration subsequently revoked the consent the former government had granted. Now, this victory faces being overturned by an secret arbitration panel accountable to only the companies bringing the case.

Last August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. Last week a dispute settlement body in the US capital was convened to hear it.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had received permission to go ahead. We have no idea how much this might be. Who is representing it challenging the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

The Russian Lawsuit

Simultaneously that the panel on the mining lawsuit was established, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case to date, but it appears probable that he will utilise the tribunal to contest the penalties the UK imposed on him following the invasion of Ukraine. He has already filed a claim against another European state for this reason, demanding a colossal sum: an amount representing half state's annual revenue. Included in the counsel acting for him in that case? Cherie Blair, wife of the ex-UK leader.

International law scholars believe that the EU’s hesitation in using frozen Russian assets as security for its financial support package is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over democratic administrations might be preventing the funds Ukraine urgently requires.

False Assurances and Mounting Costs

The public was told that such things were not possible. Years ago, a senior politician, promoting the most significant and hazardous of all investment pacts, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An adviser on this matter accused activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear these lawsuits. Predictions that “as corporations begin to understand the power they’ve been granted, they will turn their attention from the poorer states to the developed economies” were met with general mockery.

That threat has come to pass. This year, oil and gas and extraction companies have initiated a record number of claims against nations rich and poor, challenging – as in the case of the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP